The ‘four-present rule’ that could save you money this Christmas

As those Black Friday purchases start arriving, not everyone is getting busy with the gift-wrapping. Today is Advent Sunday – and tis the season to check your finances.

One client, a City professional and mother of one in her fifties, says the start of December is a good time to see how much she can afford to spend over the coming weeks – and, better still, to find ways to make savings.

“I think of it as a seasonal reset of my finances – a ‘leaky bucket’ exercise,” she says. “It’s about making the time to do something that’s a bit boring, which is why we all put it off, isn’t it?

“I went through my bank accounts forensically and, all in, it took two hours from start to finish to save just over £1,500. I can’t believe how much I saved.”

Ditch those subscriptions

To start with, she has carried out a “subscription sweep” – ending unused online course subscriptions (£31 a month), and LinkedIn Premium, which was costing her £49.99 a month: “There were so many things where I’d become an accidental subscriber,” she says.

Unwatched TV streaming services and subscriptions for children’s activities that were no longer needed also went. There was also an instance of being charged twice for the same thing.

“We pay for storage, following a house move. The storage firm was bought out recently and we were charged twice in one month, which I only realised as a result of doing this task.

“I do feel some embarrassment over how long I’ve put off doing this task given how little time it took to do in the end, plus the wasted money.

“But I also think of it positively as plugging holes for the future rather than regret at not having done it before now. Now I know the subscription traps that I’ve fallen into, I’ll be less susceptible in future.”

Don’t sweat the small stuff

If you’re trying to cut back and strapped for time, focus on your biggest expenses for a better return on investment over dumping that £4.99 TV subscription.

For example, if you’re coming to the end of your mortgage deal, it’s worth investigating whether a new deal could save you money.

This could be the case if you’ve built up more equity in your property, for example. Speak to a mortgage broker.

Similarly, the gas and electricity bill for a household with typical usage, based on the energy price cap, paying by direct debit, is currently £1,717 a year. This will rise to £1,738 in January.

Run your usage through an online comparison service to see if you can save by switching.

Remember the 50-30-20 method

The 50-30-20 budgeting method worked really well for one of my coaching clients, who is a self-employed GP with multiple sources of income.

Here, you allocate 50 per cent of your income to cover essential spending, such as mortgage/rent and bills; 30 per cent to cover lifestyle spending; and 20 per cent to cover savings and investing.

My client, aged 40, says: “I have different sources of income and I struggled to keep a handle on it all. Now, every pound that comes into my pocket gets split 50-30-20.

“I’ve been managing my money in this way for a year now, and it’s given me clarity and organisation. I have a handle on my finances and feel in control of my money.

“I like it as a rule of thumb to make sure I have enough money to cover bills, enough to cover my wants, as well as saving money for the future.

“I spend less time worrying and stressing about money and feeling like I need to work every hour to keep up with bills. I have freedom to enjoy my money.”

Create a financial calendar

I shared this tip with a new client last month, and she loved it. She was wondering how to stop getting caught out by unexpected expenses.

Look at the renewal dates for your “big payments” – things like your car and home insurance, utility bills, mobile phone contracts, lease car agreements and so on.

Put a reminder in your physical or digital diary/calendar a month before the renewal date to give you time to shop around for new deals. A simple, practical forward-planning win.

As my client said, “It’s so simple, how have I never thought of this?”

Similarly, here’s how to get ahead of your occasional spending – the things we know about in advance but can fail to account for until the moment is upon us, such as Christmas, birthdays and holidays.

Break down your occasional spending into regular monthly chunks, and put that amount aside every month.

For example, if Christmas is likely to cost you £600, then planning ahead to save £50 a month from the start of the year is better than trying to find £600 in December.

Apply the four-present rule

Buying for children this Christmas? Try the four-present rule. Here, you buy your child something they want, something they need, something to wear and something to read.

I have my cousin, mother to two boys aged three and six, to thank for this tip. It’s a great one for parents.

For example, my cousin’s youngest loves Mickey Mouse. Last Christmas, she bought him a Mickey Mouse toy (want), Mickey Mouse bedding (need), Mickey Mouse pyjamas (wear) and Mickey Mouse book (read).

Talia Loderick is a money coach (talialoderick.co.uk)